Tuesday, July 18, 2017

It is not a surprise to see another telecom acquisition. The industry perpetually moves toward consolidation whenever greater efficiencies can be found by bringing more users onto a common network. But among all likely buyers and sellers in the telecom world, this combination is surely a bit odd: Cincinnati Bell and Hawaiian Telcom. Geographically, Honolulu lies 4,428 miles (7,126 km) to the southwest of Cincinnati, a six-hour time difference and a big cultural gap. There won't be many opportunities for network consolidation, joint customer integration or operational synergies.

The deal is structured as a cash and stock transaction in which Cincinnati Bell will pay approximately $650 million, including the assumption of Hawaiian Telcom's net debt. The offer is a 26% premium to Hawaiian Telcom's closing price of $24.44 on July 7, 2017. Hawaiian Telcom stockholders will have the option to elect either $30.75 in cash, 1.6305 shares of Cincinnati Bell common stock, or a mix of $18.45 in cash and 0.6522 shares of Cincinnati Bell common stock for each share of Hawaiian Telcom, subject to proration such that the aggregate consideration to be paid to Hawaiian Telcom stockholders will be 60% cash and 40% Cincinnati Bell common stock. Cincinnati Bell shareholders are the prevailing party. After closing Hawaiian Telcom stockholders will own approximately 15% and Cincinnati Bell stockholders will own approximately 85% of the combined company.

Sovereignty has long been a touchy issue for the Hawaiian Islands. In this case, Cincinnati Bell said it plans to preserve the Hawaiian Telcom brand identity. It also promises to preserve the jobs of Hawaiian Telcom's 1,300 employees, to maintain local management, to honour existing union labour agreements, and to name two Hawaii residents to the combined company’s board of directors. There is also a commitment to invest in Hawaiian Telcom's Next-Generation Fiber network statewide, although this is not quantified in the press materials with any dollar figure or budget plan.

Hawaiian Telcom has been to this dance before

Hawaiian Telcom traces its roots all the way back to 1883, when Hawaii’s King David Kalākaua granted a charter to Mutual Telephone Company, which was owned by Archibald Scott Cleghorn, father of Princess Ka'iulani. In the years after Hawaii became the 50th U.S. state, Mutual changed its name to Hawaiian Telephone Company and was never formally a part of the Bell System empire. In 1967, General Telephone & Electric Corporation (GTE) of Connecticut acquired the company and it was renamed to GTE Hawaiian Tel. This marked the first time the company was controlled from the mainland U.S. GTE eventually merged with Bell Atlantic to form Verizon Communications, at which point GTE Hawaiian Tel. was renamed Verizon Hawaii. By 2004, Verizon wanted out of non-strategic landline markets, including Hawaii, and so Verizon Hawaii was sold to The Carlyle Group for $1.65 billion in cash. At the time, Verizon Hawaii operated 707,000 switched wireline access lines and annual sales of about $610 million, operating income of $58 million and depreciation expense of $111 million. By this measure, the Cincinnati Bell acquisition price is less than half the price of 13 years ago.

In 2008, the company filed for bankruptcy protection. A two-year period of reorganisation followed. In 2010, Hawaiian Telcom became a publicly listed company. In 2011, Hawaiian Telcom was granted a cable TV license. One geographic advantage on being in the middle of the Pacific Ocean is that there is limited satellite TV coverage. This has led to a duopoly market shared with the Oceanic/Charter cable network. Compared to typical U.S. cities, Honolulu is a far denser metro area. It has approximately 300,000 households. With an initial focus on Honolulu, Hawaiian Telcom currently has about 43,000 residential video subscribers on its IPTV platform, which is based on the Ericsson Mediaroom solution, compared to approximately 310,000 subscribers for Oceanic cable statewide.

With its Fioptics service, Hawaiian Telcom is looking for much better market penetration, higher ARPU and lower churn. The fibre platform also enabled Hawaiian Telcom to launch the first Gigabit residential service in the islands in 2015. Presumably, the acquisition by Cincinnati Bell will bring much needed capital to continue the residential fibre in the rest of Honolulu and then to the other Hawaiian Islands.

A stake in the new SEA-US transpacific cable system

Hawaiian Telcom is a consortium partner in the new $250 million, 15,000-km Southeast Asia – U.S. (SEA-US) cable system, which is designed to bypass congested, earthquake-prone regions (Luzon Straight) on the transpacific route. It will deliver an initial 20 Tbit/s capacity when it enters service later this year. Cincinnati Bell noted that this ownership stake provides it with direct access to the 2.6 Tbit/s of transpacific capacity.

Here are some Hawaiian Telcom highlights:

• First quarter revenue was $94.5 million, compared to $98.8 million in the first quarter of 2016, down $2.0 million year on year; the revenue declines is associated with legacy voice and low-bandwidth Internet services, partially offset by increases from consumer video, high-bandwidth business data services, and equipment and related services.

• Net loss for the first quarter of $2.0 million, or 17c per diluted share, primarily due to $3.7 million in non-cash pension expense and other related one-time costs associated with employee retirements in the quarter.

• First quarter business revenue totalled $43.9 million, compared to $44.8 million in the first quarter of 2016. In business data services, customer demand for high-bandwidth IP-based services continued to rise, as reflected by a 16.1% year on year revenue increase in Ethernet and routed network services, 14.1% increase in normalised dedicated Internet access revenue, and 14.4% increase in VoIP revenue; business VoIP lines grew 15.9% year on year to approximately 20,000 lines, offsetting more than a third of total legacy voice access line decline.

• Hawaiian Telcom has more than 7,000 total fibre GPON-enabled business addresses connected.

• First quarter consumer revenue totalled $34.3 million, compared to $36.2 million in the first quarter of 2016. Revenue growth in the quarter from TV and high-bandwidth fibre Internet services was more than offset by the year-over-year revenue decline in consumer legacy voice and low-bandwidth copper Internet services.

• Video services revenue grew 12.4% year on year to $10.6 million for the quarter.

• Video subscribers grew 15.3% during the same period and the company ended the first quarter with nearly 42,800 subscribers in service.

• Penetration rate in the company's NGN footprint is 24%, an increase from 21% in the same period the prior year.

• During the first quarter, 1,000 additional success-based households were fibre-enabled, increasing the total number of households enabled to 203,000.

Cincinnati Bell is looking for growth opportunities

Cincinnati Bell's history also goes back a long way. The company traces its start to the 1870s, when it gained exclusive rights to the Bell franchise within a 25-mile (40-km) radius of Cincinnati. Under the unified Bell System, the company maintained a degree of autonomy because AT&T held a minority stake. Since the historic 1984 AT&T break-up, Cincinnati Bell has fiercely remained an independent company, resisting the merger fever that spread amongst Bell Atlantic, Bell South, Nynex, Pacific Bell and Southwestern Bell.

Apart from its landline business, Cincinnati Bell operated a GSM network serving southeastern Indiana, southwestern Ohio, and northwestern Kentucky from 1998 to 2015, when the network was sold to Verizon. Cincinnati Bell also owned approximately 9.5% of CyrusOne, the wholesale data centre operator. The remaining 2.8 million shares of CyrusOne were sold in Q1 2017 for $141 million, resulting in a $118 million gain for the company.

Cincinnati Bell has been a very well-managed company but like many incumbent operators has experience the long-term challenge of declining revenues for legacy services, which often offset growth in new services. The company has been on the lookout for attractive opportunities to increase revenues from strategic services (currently >50%) and to alleviated its relative geographic isolation. Cincinnati Bell is focused on its Fioptics residential FTTH service, which is now available to 545,200 addresses in its territory - approximately 68% of Greater Cincinnati. With the Hawaiian Telcom deal, the company is hoping the positive traction it has seen with its Fioptics residential service in Cincinnati can be replicated in Honolulu.

On the same day that it announced the Hawaiian Telcom deal, Cincinnati Bell also announced a definitive agreement to acquire OnX Enterprise Solutions, a technology services and solutions provider in North America and the UK, for a total consideration of approximately $201 million in cash on a cash-free, debt-free basis. OnX is focused on IT services for Fortune 500 companies. The acquisition provides Cincinnati Bell with 20+ IT sales offices and access to 50+ data centres through strategic partners.

Cincinnati Bell highlights:

• Total Internet subscribers of 307,400 at the end of the first quarter, up 15,000 subs compared to a year ago ▪ Voice lines totalled 516,900, decreasing 2% from the prior year.

• Fioptics monthly ARPU for Q1 2017 was up approximately 3% from Q1 2016. ARPU is as follows: Video – $86, Internet – $49, Voice – $27; in Q1, the company invested $36 million in Fioptics to pass an additional 11,800 customer locations.

• Business revenue in Q1 2017 were down slightly to $71 million, however fibre-based business Ethernet services were up 11%.

• Carrier revenue decreased year-over-year due to on-going FCC switched access rate reductions and the fact that national carrier customers are increasingly focus on reducing costs.

• IT services and hardware sales amounted to $86 million for Q1 2017, down $16 million from Q1 2016 due to the cyclical nature of these transactions and customers shifting to the cloud.

Italy's TIM announced it is expanding its network transformation agreement with Cisco to renew its OPM (optical packet metro) infrastructure, and will introduce Cisco's ASR 9000 (Aggregation Services Router) solution to modernise its OPM network.

TIM's optical metro network collects and aggregates accesses to fixed, mobile and company lines, and by deploying the Cisco ASR 9000 the operator aims to increase the speed and efficiency of the infrastructure to support growing video and data traffic by integrating technologies that will also facilitate the adoption of 5G in the future.

Under the agreement, TIM and Cisco have launched a project designed to transform TIM's OPM network in Italy. Cisco noted that the project represents a key stage in the evolution of TIM's IP network via the deployment of new automation mechanisms and software defined network (SDN) technology that will help to deliver greater operational efficiency and enable new business models, as well as supporting the adoption of 5G technology.

When completed, the project will enable TIM to more effectively advance the digitisation of its fixed and mobile services for consumer, business and wholesale customers by simplifying and optimising operational models, delivering higher quality IP traffic transport and more bandwidth via the provision of 100 Gbit/s IP connectivity to metropolitan areas.

TIM noted that the investment is part of its 3-year, Euro 5 billion network modernisation plan for the period 2017-19 designed to speed the implementation of national ultra-broadband (fibre and 4G) coverage, with the goal of extending such coverage to 99% of fixed-network homes and over 99% of the population with 4G by the end of 2019.

* TIM recently announced that it had enabled upload speeds of up to 75 Mbit/s for all mobile customers, and that from July this year would offer 700 Mbit/s download speeds, over its 4.5G network in Turin, Milan, Rome, Naples, Palermo, Taormina and Giardini-Naxos. In addition, the company announced plans to launch a new 1,000 Mbit/s fixed-line service in 70 Italian municipalities.

GENBAND, a provider of real time communications software, which in May entered into an agreement to merge with Sonus Networks, a supplier of solutions that enable secure and intelligent cloud communications, announced a collaboration with open source solutions company Red Hat to develop network functions virtualisation (NFV) solutions designed to enable service providers to leverage the telco cloud.

Under the agreement, Red Hat has certified multiple GENBAND virtual network functions (VNFs) solutions and its VNF Manager on Red Hat OpenStack Platform 10. GENBAND has also become part of the Red Hat Connect for Technology Partners and the Red Hat Connect for Business Partners programs.

In addition, GENBAND's VNF Manager enables the lifecycle management of GENBAND and third party VNFs and has been certified for Red Hat OpenStack Platform virtualised infrastructure manager (VIM). GENBAND's NFV solutions also include Predictive Analytics and Element Management.

Red Hat's NFV solution is based on open source components, while Red Hat OpenStack Platform 10 also supports DPDK Accelerated Open V-Switch (OVS) and SR-IOV utilised by the Advanced Media Software (AMS) VNF for media processing.

Sonus Networks and GENBAND announced on May 23rd a definitive agreement under which the two companies would combine to create a next-generation communications networking company. Under the terms of the agreement, Sonus and GENBAND shareholders will each hold approximately 50% of the new entity which will have an estimated enterprise value of approximately $745 million.

Ericsson announced that it has been selected to build a NarrowBand IoT (NB-IoT) system for Chunghwa Telecom, Taiwan’s largest integrated telecoms company designed to enable the island to implement Internet of Things (IoT) services.

Ericsson stated that Chunghwa Telecom will use the NB-IoT system to trial a range of IoT devices and applications in its laboratory.

The end-to-end NB-IoT solution developed for Chunghwa Telecom will comprise a range of Ericsson solutions including the Ericsson Radio System, Massive IoT RAN software, virtual Evolved Packet Core (vEPC), virtual subscriber data management (vSDM) and the IoT Smart Device and Application service on the AppIoT platform.

Ericsson noted that the vEPC is deployed as a dedicated IoT packet core and includes using network slicing functionality. This architecture is designed to enable Chunghwa Telecom to explore massive machine-type communications use cases and quickly launch new services.

NB-IoT is a 3GPP standards-based low power wide area (LP-WAN) technology that is designed to offer significant performance improvements in terms of deep indoor coverage, low power consumption, device complexity, system capacity and spectrum efficiency.

* Ericsson and Chunghwa Telecom (CHT) signed a Memorandum of Understanding (MoU) covering the trial of 5G technology at MWC 2017 in February. Under the MoU, Ericsson and Chunghwa Telecom planned to jointly identify 5G user cases and applications for the digital transformation of selective industry verticals, including transportation and utilities.

* In addition, the two companies planned to work with partners in academic institutions, public offices, industry bodies and enterprises to accelerate ecosystem developments. The parties also agreed to develop and implement a network evolution strategy from LTE-Advanced to 5G technology.

Nokia announced it has been selected to provide an advanced communications network to the Placer County Water Agency (PCWA) in northern California to support hydro-electric power generation and water distribution services in the area.

Nokia noted that PCWA is the primary water resource agency for Placer County, a 1500-sq mile area between the Sacramento Valley and the Sierra Nevada mountains, with responsibility for water resource planning and management, retail and wholesale supply of irrigation water and drinking water to more than 200,000 customers.

Under the agreement, Nokia will replace PCWA's existing communications infrastructure with an IP/MPLS and packet microwave network designed to support a range of critical utility applications, enabling the agency to more effectively utilise and manage its power generation, water resources and water supply operations.

Managed by Nokia's Network Services Platform (NSP), the network features the 7705 Service Aggregation Router (SAR) portfolio and 9500 Microwave Packet Radio (MPR), which are designed to support applications required for utility operations by offering security, reliability and resiliency capabilities. The flexible network will allow PCWA to migrate existing SCADA system traffic and support new high bandwidth video traffic on the same network without compromising performance.

Nokia company SAC Wireless will provide the overall construction and deployment of the network, including managing civil works such as pre-construction site verification, network design and engineering, installation and testing of towers, repeaters, shelters, backup power systems and overall project management.

Nokia noted that the agreement, its first public customer agreement with a water utility, builds on its strategy of providing mission-critical networks to power utilities, having served over 200 such customers worldwide, and furthers its strategy of expanding its customer base beyond the telecommunications sphere.

The statewide network upgrade, scheduled for completion in the second half of 2017, will span more than 100 Point-of-Presence sites and include transmission speeds from 10G to 100G. The Coriant solution includes the Coriant mTera Universal Transport Platform and Coriant 7100 Packet Optical Transport Platform, as well as the Coriant Transcend Software Suite, a sophisticated end-to-end management solution that improves service resiliency, simplifies operations, and supports fast provisioning of high-capacity services.

"We are excited to be working with Frontier to enhance the performance of its optical network to ensure a superior customer experience,” said Richard Miller, Managing Director, North America, Coriant. “Our high-capacity, low-latency solution is a perfect fit for Frontier’s needs, and is fully optimized for the high-bandwidth services and applications driving network transformation, including enterprise cloud, IoT, and ultra-high-definition video streaming.”

C&W Communications (C&W) announced that it has completed a pre-5G trial in Antigua, and that once installed the country will become the first in the region with an advanced pre-5G network delivering download peak speeds of up to 800 Mbit/s.

In the next phase of the trial, the company stated that it expects to test a 5G prototype delivering peak speeds of 2 to 5 Gbit/s. The pre-5G trials were announced by C&W CEO John Reid during the CANTO annual conference and trade exhibition in the Dominican Republic as part of his keynote address.

C&W's pre-5G technology trial, a combined effort carried out with parent company Liberty Global, is based on LTE Advanced Pro (LTE-A Pro), which is designed to deliver lower latency, greater capacity and improved reliability for customers and enable a faster and better quality mobile Internet service.

C&W stated that in early October, it plans to conduct further tests on a 5G prototype network designed to deliver wireless data connections above 2 Gbit/s. If the trials prove successful, and the business case is assessed to be favourable, the company plans to invest a further $5 million in Antigua for a major upgrade of the wireless infrastructure. C&W noted it has invested a total of $1.5 billion in the region over the past three years.

C&W's stated that its pre-5G trial and 5G prototype trials are part of a partnership with Ericsson, which will provide the equipment and software in Antigua and for its operations across the Caribbean.

In 2016, Ericsson and Cisco announced an agreement to supply and install IP networks for C&W, operating the retail brand Flow, in three Caribbean markets. The project included an upgrade to the IP backbone network in the Bahamas and a new business-to-business IP/MPLS network in Jamaica and Barbados.

Deutsche Telekom unit T-Mobile US, the Un-carrier serving nearly 73 million customers in the U.S., claims that it has become the first wireless provider in North America to complete Narrowband IoT (NB-IoT) field tests on a live commercial network working in partnership with Qualcomm and Ericsson.

Narrowband IoT or NB-IoT is an evolution of LTE technology built on industry standards and uses very small amounts of dedicated spectrum to carry data with incredible efficiency and performance.

T-Mobile stated that the field tests were conducted in partnership with Qualcomm and Ericsson across multiple sites on its live commercial LTE network in Las Vegas and involved the uses of 200 KHz of AWS spectrum.

T-Mobile also announced an agreement with the city of Las Vegas for the deployment of IoT technology throughout the city, including Narrowband IoT. Under the agreement, T-Mobile and Las Vegas are piloting a number of IoT projects, initially in the city's Innovation District, an area close to the Las Vegas strip that is dedicated to developing emerging technologies.

Specific IoT projects include to be implemented in Las Vegas include: flood abatement, with flood and storm drainage sensors installed to provide early warning and fault detection; smart city lighting, with T-Mobile to power the city's LED lighting using a single compact device; and environmental monitoring via sensors sited on existing light poles to monitor temperature, humidity and environmental gases.

* Recently, T-Mobile US announced the demonstration of a mobile broadband data session live in the field utilising License Assisted Access (LAA) on its commercial network. The field testing was launched in Los Angeles and achieved a 741 Mbit/s download speed using 80 MHz of aggregated spectrum.

* At the same time, T-Mobile also claimed to have become the first national U.S. wireless carrier to make LTE-U available to its customers, with launches in Bellevue, Washington, Brooklyn, New York, Dearborn, Michigan, Las Vegas, Nevada, Richardson, Texas and Simi Valley, California.

RADWIN, a global provider of wireless broadband solutions, announced the immediate availability of its new carrier-grade 100 Mbit/s subscriber unit, SU AIR.

RADWIN stated that it offers a carrier-grade portfolio designed for rural service providers in the U.S. The JET AIR Bi-Beam base station has been adopted by Tier-1 carriers worldwide and provides advanced interference immunity to enable improved service reliability and network scalability.

The company's new SU AIR subscriber units feature an option to add RADWIN's TurboGain slide-on antenna, designed to provide higher gain, longer range and enhanced immunity to interference. In addition, RADWIN's WINTouch smartphone application helps to simplify SU AIR alignment, configuration and installation, and enable fast mass deployment and to assure high throughput connection.

RADWIN claims that JET Bi-Beam is the first bi-directional Beamforming antenna. Combined with the product's air interface and dynamic bandwidth management capabilities, JET can deliver a fibre-like service experience while also enabling wide area coverage utilising fewer base station towers than other systems.

Regarding its solutions, Roni Weinberg, RADWIN EVP, global business, and COO, said, "JET is garnering… strong interest from rural service providers in the U.S. (as) JET's Bi-Beam technology allows them to deliver 5 to 10 times more capacity than existing systems… where there is high interference… this is crucial for service providers looking to deliver 50-100 Mbit/s service in the 5 GHz congested band…".

Recently, RADWIN announced that Amarillo Wireless, a wireless Internet service provider based in Amarillo, Texas, had deployed its JET wireless broadband solutions to offer high-speed broadband packages of up to 150 Mbit/s to business customers.

RADWIN has also recently announced the deployment of JET solutions by Valley Communications Association, a subsidiary of the Valley Electric Association utility company in Nevada, to provide high-speed broadband to 5,000 business and residential customers, with plans to expand service to 20,000 customers, and Data-Max Wireless, an Arizona-based service provider, to upgrade its network for business and residential customers in Mohave County.

SQUAN, a telecommunications infrastructure service provider based in New Jersey, has acquired Communications Specialists, Inc. (CSI), a leader in aerial and underground fiber construction services for Multiple Services Operators (MSOs), Internet Services Providers (ISPs) and wireless network operators. Financial terms were not disclosed.
SQUAN has been aggressively pursuing the expansion of services in support of a long-term view of Smart City development and all roads that lead to the development and operation of heterogeneous networks.

“CSI stands out as leader in quality and is a growing provider of services that are highly complementary to the current business in which SQUAN is engaged,” states Duane Albro, Chief Executive Officer, SQUAN.